Tax planning;

Page 1

Tax Planning
by FREDERICK W. BASSINGER Principal, Minneapolis Office
Presented before the Federal Income Tax Institute of Northern Illinois Uni­versity,
DeKalb, Illinois—November 1962
AX PLANNING should, in this modern day, be an important part of
every business transaction. Taxes cannot be ignored, because only after-income-tax dollars are available to the businessman for his own purposes and pleasures. Further, if he doesn't spend all he makes during his lifetime his estate may be further dissipated by estate and inheritance taxes.
The first step necessary for any taxpayer to concern himself with is that of choosing his goal. Usually the taxpayer will be concerned with securing for himself the greatest after-tax proceeds possible. He must decide whether he wants as much cash as possible as soon as possible or is willing to defer some current benefits to secure perhaps even greater benefits at a future time. He must decide whether he wants to include his family in his financial plan and thus, considering the whole picture, to make it his goal to receive the greatest after­tax
benefits available, including any gift, estate, and inheritance taxes to which he, his estate, or his heirs may be subject.
The usual situation lies somewhere between these two extremes. The taxpayer is usually willing to defer some of the fruits of his efforts if the tax savings so justify, and he is usually willing to divide some highly taxed wealth among other low-bracket members of his family—especially if in any event he contributes to their support. Perhaps he is very charitably minded and is seeking a way to con­tribute
more to charity than is currently deductible. Perhaps certain members of his family have not met his standards or he feels more wealth in their hands would only stymie initiative.
Once he decides his basic objective, however, the taxpayer is then ready to proceed toward realizing these goals; to do this he must have the help of effective tax planning.
The opportunity to control the tax burden exists because of the alternatives the taxpayer has available. All possible courses of action must be analyzed and the tax consequences weighed before an intelligent decision can be made. By alternatives I mean not only making elections available under the Code—such as instalment re-
218